The National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service and the Financial Intelligence Centre today warned the public to be aware of the risks associated with virtual currencies - including Bitcoin - in transactions or investments.
In a statement released by Treasury, the bodies note that "while there are benefits associated with this new technology, it is difficult to assess those benefits against the risks of something so novel, innovative and technologically sophisticated".
The statement adds that virtual currency users can become susceptible to fraud as they may be "less circumspect than usual" when faced with the promise of high-return investments. "Accordingly, we strongly advise users to consider the concomitant risks when evaluating undertakings involving virtual currencies. The relevant authorities will continue to monitor and assess the use of virtual currencies and consult with private sector stakeholders in this regard."
Unregulated climate
The bodies said one of the main drawbacks to virtual currencies was that no legal recourse or protection is afforded to its users, owing to the unregulated climate.
"While virtual currencies can be bought and sold on various platforms, they are not defined as securities in terms of the Financial Markets Act. The regulatory standards that apply to trading of securities therefore do not apply to virtual currencies."
Other reasons cited in the statement:
* No investor protection and no recourse: The price of currencies can be volatile, rising and dropping rapidly, while transactions are irreversible.
* Virtual platforms are prone to operational risks: Digital wallets and exchange platforms could be hacked.
* Virtual currencies are susceptible to misuse: The high degree of anonymity makes them attractive to criminals.
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